Fintso, a vertical aggregator for independent financial advisors, end consumers and mutual fund manufacturers, has come up with the report on the Impact of COVID-19 on the Investor Eco-system. The report largely emphasizes the effects with regards to various players of the ecosystem i.e. consumers, regulators, distributors and manufacturers. The research concludes that the impact on the distributors will be the biggest factor that will change the investor landscape in the coming months.
Distributors would require to discover the solution to sustain themselves especially the small players from a cash flow perspective and sustainability perspective. The methods could be adapting the conventional mode of communication, switching their product sales pitches and risk management for their clients. As per Asset type distribution, 81% of equity-oriented schemes, over 87% of retail and 78% of HNI Invested through a distributor both in T30 and B30 cities.
Few other highlights from Fintso report on the investor ecosystem:
- Unchanged Clients Behaviour: A downturn in the equity market does not necessarily change investing behaviour, as long as people believe that it will go up. For e.g., putting it statistically, Monthly Inflow of SIPs had shown growth over the last financial year and was ~ ₹ 8,600 Cr despite the fall in the markets
- Cumulatively, SIPs account for ₹ 2.39 Lakh Cr of AUM
- Monthly Inflow had shown growth over the last financial year and was ~ ₹ 8,600 Cr despite the fall in the markets.
- Regulatory Changes: Implementation of regulations leading to structural changes due to longer impact would result in business changes There are changes that are done for immediate needs: e.g. Moratorium on loans (will affect a lot of lenders, including P2P), and some like the SEBI regulations that basically banned the usage of Papers for MF transactions
- Independent financial entrepreneurs (financial advisors) will have to adapt to new digital measures and embrace new channels of communication, including VCs, WhatsApp / Telegram, and email, but most importantly, their own digital App
- They will also have to reinvent who advisors cater to – rather than focussing on new client acquisition, they will consolidate their base and increase the share-of-wallet from their existing clients by showcasing a wider bouquet of products and services
- Effect on distributors: Foreseeable cost reduction like reducing back office and higher dependence on automation, omni-offerings and the need for creating their own brands
COVID-19 has disrupted the Investor Eco-system and the unpredictability about the period of time the industry will require to get back to normal makes the situation although more vulnerable. As per the Fintso report, the recovery method would vary as per the period of lockdown. If industry faces impact of 0.5 years, the people can expect a V shape “recovery”, habits and behaviour would not change much, and people “bide” their time before they go back to the way things were. However, if the impact stays for 1.5 years or 3 years, it will be a U and L shaped recovery respectively.